WIREDGOV

Ofgem grants £317 million offshore transmission licence for Greater Gabbard wind farm

• First Offshore Transmission Owner (OFTO) project financed through capital markets
• Ofgem’s tender process enables first UK use of innovative European Investment Bank (EIB) funding product, helping deliver lower costs for consumers
• Over £1.4 billion transmission investment secured through Offshore regime to date

Greater Gabbard OFTO plc has yesterday been granted a licence to own and operate the transmission link to the Greater Gabbard wind farm. The wind farm has 140 wind turbines generating 500 MW, which is enough clean energy for 530,000 homes. Greater Gabbard OFTO plc is owned by a consortium comprising Balfour Beatty Investments Ltd, Equitix Ltd and AMP Capital Investors Ltd.

The deal represents further evidence of the innovation introduced by Ofgem’s competitive tendering process which is helping to drive down the costs for consumers of connecting offshore windfarms to the grid. This is the first Offshore Transmission Owner (OFTO) project to be funded through capital markets and the first UK project, as well as only the second across Europe, to make use of the innovative EIB Project Bond Credit Enhancement (PBCE) product. This product is designed to enable infrastructure projects, such as the Greater Gabbard OFTO, to attract additional private finance from institutional investors such as insurance companies and pensions funds. The PBCE reduces the investment risk, enabling the project to attract cheaper finance, which ultimately reduces costs for consumers.

Ofgem appointed Greater Gabbard OFTO plc to take over ownership of the link from Greater Gabbard Offshore Winds Limited following a competitive tender under the OFTO regime. Greater Gabbard Offshore Winds Limited is owned equally by SSE renewables and RWE npower renewables.

Robert Hull, Ofgem E-Serve Managing Director said: "This deal provides further evidence of the benefits to consumers of opening up the offshore transmission market to competition, and ensuring we get best value from innovation in the funding markets. We are delighted our tender has enabled the first project in the UK to utilise the EIB’s PBCE product, confirming the OFTO regime’s status as an established infrastructure asset class.

The Offshore regime has now secured over £1.4bn of investment to date, leading to benefits to consumers through the competitive regime.”
 
Jonathan Taylor, European Investment Bank Vice-President for the UK, said “The public bond issue for the Greater Gabbard OFTO represents the first use of the joint EIB-European Commission Project Bond Initiative in the UK. This adds a new dimension to infrastructure finance in the UK energy transmission sector by attracting greater participation by institutional investors in an essential part of the offshore wind value chain. This new scheme demonstrates the strength of our continued partnership with Ofgem to support investment in transmission projects essential to connect sources of renewable energy to the national grid. The European Investment Bank is committed to supporting crucial energy investment across Europe and has provided more than £6 billion for long-term investment in the UK energy sector over the last 5 years, including £500 million for the Greater Gabbard offshore wind-farm generating assets agreed in September earlier this year.”

Notes to editors

1. The offshore regulatory regime, developed by DECC and Ofgem, was launched in 2009 and uses competitive tendering for licensing offshore electricity transmission. The regime is being delivered in two parts, transitional and enduring. The transitional regime involves two tender rounds, opening the way for transmission licencees to own and operate transmission assets for offshore renewable projects that have been or are being constructed by an offshore generator. Future tenders will fall under the enduring regime, which will enable Ofgem to run tenders for projects where:

• Offshore Transmission Owners (OFTOs), design, build, operate and maintain the transmission assets; or
• generators build the transmission assets and then transfer them to OFTOs at construction completion.

2. For more information see the Offshore section of our website.

3. The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals.

4. The Europe 2020 Project Bond Initiative, is a joint programme by the European Commission and the European Investment Bank designed to stimulate capital market financing for infrastructure delivered under ‘project finance’ structures. The pilot phase will benefit from EUR 230 million from the EU budget and will focus on encouraging capital market investment worth more than EUR 4 billion for transport and energy investment. To benefit from credit enhancement during the pilot phase suitable projects will need to reach financial close between now and the end of 2016, provided that the EIB obtains financing approval by its Board before the end of 2014.

5. The annual revenue paid to Greater Gabbard OFTO is over one fifth lower compared to completed projects tendered earlier in Transitional Tender Round 1 (TR1), when considered as a proportion of the capital value of the transmission assets.

6. The Greater Gabbard wind farm is owned by SSE renewables (50%) and RWE npower renewables (50%). It has a 140 turbines generating 500 MW, which is enough clean energy for 530,000 homes. It is located 14 miles off the Suffolk Coast and is the first wind farm in the UK to be constructed beyond the 12 mile limit offshore.

7. Further details on the Greater Gabbard wind farm, including how it could provide enough clean energy to power around 530,000 homes, can be found on the SSE website.

8. Ofgem expects the first enduring tender round, Tender Round 3 (TR3), to launch in early 2014.

For further press information contact:

Ofgem

Felicity Beverley: 020 7901 3858
Rory Edwards: 020 7901 7246
Out of hours: 07766 511470

European Investment Bank

Richard Willis, + Tel:+352 437982155, r.willis@eib.org
Website: www.eib.org/press - Press office: +352 4379 21000 – press@eib.org